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Eurozone’s largest tax collectors eye digital giants’ turnovers

The eurozone's big four want the European Commission to develop a new tax to force internet giants like Google and Facebook to pay more taxes in Europe.

The finance ministers of France, Germany, Italy and Spain called on any new levy to target revenues generated by digital firms in Europe rather their profits, as is currently the case, according to a memo circulated ahead of a meeting of EU finance ministers in Tallinn next week and obtained by POLITICO.

The goal is to obtain a mandate from a European Council meeting in Tallinn dedicated to digital policy issues later this month that would lay the groundwork for a subsequent Commission proposal. It would need to secure the unanimous backing of EU capitals.

"We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries," the ministers wrote in the memo. "The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax."

Debate has raged in the last years over the scant levels of tax paid to European budgets by Silicon Valley firms that generate a major share of their revenues in Europe.

In August 2016, the Commission said Apple had illegally reduced taxes owed in Ireland by some €13 billion. It is currently probing a tax deal given to Amazon by Luxembourg. A settlement whereby Google agreed to top up its U.K. taxes by £130 million elicited outrage.

France promised last month to renew efforts to combat such scenarios, in particular after a French court struck down efforts by Paris to force Google to top-up its taxes.

In the memo, the eurozone's four big economies sketched out what they call an “equalization tax,” which they say should apply to all EU countries, not just eurozone members. It is one of several proposals that will be discussed by finance ministers meeting next Friday and Saturday.

A discussion document circulated by Estonia — and obtained by POLITICO earlier this week — suggests a number of quick fixes, including an online advertisement levy and a withholding tax.

In parallel, EU members continue to discuss a proposal to harmonize rules to calculate firms' taxable profits in Europe. The Commission recently downplayed the possibility of using the initiative to increase taxes on digital players, contradicting efforts by some MEPs.

That reform — first proposed in 2011 and recast in 2016 — has struggled to overcome opposition from a number of countries including Luxembourg and Ireland. In a May debate, nine finance ministries cited concerns about national sovereignty, tax revenues and changes to their tax bases.

That bodes ill for the latest proposal by the eurozone's big four, which will also need to secure the unanimous backing of all EU capitals.